This time around the AXA Group and Credit Suisse lost no time in coming to an agreement to sell Winterthur, the Swiss bank’s insurance division, to the French insurer for CHF 12.3 billion (around $10 billion – €7.9 billion). The widely rumored sale (See IJ Website June 12) significantly strengthens AXA’s position in Switzerland and other European countries.
“This transaction is a unique opportunity to reinforce our leading position in our core European market and to increase our presence in high growth markets, notably in Central and Eastern Europe and in Asia,” noted AXA’s CEO Henri de Castries. “The complementarity of our organizations and the strong cultural fit between our teams will facilitate the integration of Winterthur and will drive value creation for our shareholders. I am confident that the combined efforts of AXA and Winterthur’s many talented and dedicated professionals will very positively contribute to our company growth, on top of our existing Ambition 2012 target.”
AXA will acquire 100 percent of Winterthur in an all cash transaction. In addition, AXA will refinance CHF 1.6 billion (€1 billion – $1.3 billion) of Winterthur’s outstanding debt, of which, AXA said, “CHF 1.1 billion [€700 million – $810 million] of internal loans to be redeemed to Credit Suisse Group at closing.”
AXA noted: “Winterthur is active in 17 countries and serves 13 million clients worldwide. It is one of the top 10 composite insurers in Europe with a leading position in Switzerland and a strong presence in Germany, Spain, Benelux and the UK. It has successfully developed high growth Life & Pensions operating platforms in Central and Eastern Europe. Winterthur also operates in selected countries in Asia. Winterthur’s portfolio is balanced between Life & Savings (62 percent of insurance revenues) and P&C business (38 percent of insurance revenues), and its client base consists of individual clients as well as small and medium-sized enterprises (SMEs), served through complementary proprietary and non-proprietary distribution networks.”
AXA further explained that the acquisition of Winterthur “fits well with AXA’s strategic focus on organic growth complemented by bolt-on acquisitions. Winterthur’s operations will complement and strengthen AXA’s distribution channels and product range, while further increasing AXA’s geographic diversification, by both strengthening AXA’s European franchise and increasing its presence in high growth markets,” which it listed as follows:
– Acquisition of a leading and profitable position in the Swiss market (#1 in P&C and #2 in Life & Savings), supported by a network of 1,500 tied agents and the Life distribution agreement with Credit Suisse Group’s Swiss retail network, which will be maintained.
– Consolidation of AXA’s position in five key European countries:
—- In Germany, AXA will enter the top 5 in Life & Savings, P&C and Health, and will gain access to 1,600 additional tied agents.
—- In Belgium, the deal will strengthen AXA’s #1 position in P&C and #4 position in Life & Savings. It is also an opportunity for AXA to enter the fast growing P&C direct segment with Touring Assurances, the market’s #2 direct distribution channel.
—- In the Netherlands, Winterthur will increase AXA’s market shares in both Life & Savings and P&C to above 3 percent. Winterthur’s Dutch business is very complementary to AXA’s and focused on profitable niches.
—- In Spain, Winterthur will improve AXA’s market position from #3 to #2 in P&C and from #11 to #7 in Life & Savings.
—- In the UK, AXA’s position in the individual savings market will benefit from Winterthur’s strong reputation with high-end IFAs and EBCs2.
The acquisition will also add to AXA’s presence in the life and pensions sector in Central and Eastern Europe and in Asia and Australia, where it already has significant operating platforms.
“Winterthur’s US P&C business, which is a profitable super-regional business focused on individuals and SMEs in selected states, is under strategic review,” said the bulletin. “In recent years, Winterthur has significantly improved its profitability and value through a streamlining of its business portfolio, a company-wide focus on operational efficiency, the leveraging of its strong risk culture and the tight management of legacy issues. AXA plans to leverage its extensive and successful experience in integrating acquired businesses to ensure a smooth and rapid integration of Winterthur. AXA intends to maintain in Switzerland the management of the Swiss and CEE operations, as well as Winterthur’s risk, closed portfolio and asset management activities.”
Concerning how it will fund the acquisition, AXA said that in addition to paying back outstanding debt it intends to finance the transaction with a balanced combination of equity and debt: € 4.1 billion [$5.164 billion] through a share capital issue and the remaining €4.8 billion [$6.04 billion] “with a mix of perpetual deeply subordinated debt, subordinated debt and senior debt.”
Concurrently, AXA announced a share issue with preferential rights to existing shareholders to raise the €4.1 billion. It’s expected to “result in the issue of a minimum of 208,228,253 new shares. Shareholders will be entitled to receive one preferential subscription right for each existing share held after market close on June 16, 2006,” said the bulletin. “9 preferential subscription rights will be required to subscribe for 1 new share at a subscription price of €19.80 [$24.94]. “The subscription price represents a discount of 18.8 percent compared to the volume-weighted average price of the AXA share.”
The transaction is subject to obtaining required regulatory approvals, including from the EC Commission (anti-trust authorities), and to the satisfaction of other customary closing conditions. Closing is expected around year-end 2006.
Was this article valuable?
Here are more articles you may enjoy.